Earnings look ahead - Taylor Wimpey, Vodafone, British Land

Taylor Wimpey, Vodafone and British Land all update the market next week.

Source: Bloomberg

Taylor Wimpey (trading statement 13 November)

Now that Help to Buy has a definite end date, the clock is ticking on housebuilders to get their affairs in order and ready themselves for a less conducive macro environment. Cost pressures continue to build, and it looks like we have further to go with regards to a slowdown in house price growth. Taylor Wimpey and others will find the next few years much harder, and a squeeze in margins means that the dividend may come under threat.

At 7.6 times forward earnings the shares are cheap, well below the five-year average of 9.9, but the dividend yield has now it 10% on a forward basis, which makes it liable to a cut in due course.

Taylor Wimpey has continued to decline since the May highs, and while it has rebounded from the October lows, the price has faltered below 170p. Further declines target 160p and then 150p.

Vodafone (first-half earnings 13 November)

Vodafone is expected to see a 2% drop in revenue for the first half, to €22.62 billion, while earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to fall by 4.6% to €7.05 billion. The average move on results day is 3.36% for the share price, but current options pricing suggests a move of 5.12%.

Sentiment towards Vodafone shares has not shifted since the last time we covered the shares, and it has continued to underperform the FTSE 100. The market continues to worry that the firm has an uphill struggle to reduce its debt pile at a time of weakening performance in key markets. The shares continue to get cheaper, at just 14.1 times forward earnings, half the five-year average.

The price faltered below 155p, as it did in October, and the bearish view persists. A move below 142p creates a new lower low, and a rally towards 155p may be another selling opportunity.

British Land (first-half earnings 14 November)

British Land has suffered as tough times envelop the UK retail. Thousands of shops have closed already this year, as high rents combine with the ongoing popularity of online shopping to lower profits. The number of administrations and company voluntary arrangements continues to rise, and there appears to be little hope of a change in the difficult trading environment. The real eastate investment trusts (REITs) sector continues to trade at a significant discount to Net Asset Value, but if the overall environment does not improve then there is little expectation that the gap will close.

At 17 times forward earnings the shares are below the five-year average of 19.9, but this difference seems justified given the gloomy outlook.

The shares have rebounded from their October lows, and have succeeded in moving above the September resistance of £6.17. Further gains target £6.43 and £6.75, but a close back below £6.17 would suggest a renewed push lower.

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